Two developers of the privacy mixer Tornado Cash, Roman Storm and Roman Semenov, have been arrested and charged with money laundering and sanctions violations related to their work with the mixer. The U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) sanctioned the mixer last year, alleging that it had been used to launder more than $1 billion for North Korea’s Lazarus Group.
U.S. Attorney Damien Williams said in a statement that Tornado Cash and its operators knowingly facilitated money laundering. While publicly claiming to offer a technically sophisticated privacy service, Storm and Semenov in fact knew that they were helping hackers and fraudsters conceal the fruits of their crimes, he said. Today’s indictment is a reminder that money laundering through cryptocurrency transactions violates the law, and those who engage in such laundering will face prosecution.
According to the Department of Justice’s indictment, Storm and Semenov designed Tornado Cash with various privacy features despite knowing that their service would be used for illicit purposes. Moreover, the DOJ alleged they maintained control over Tornado Cash, which they could have used to implement transaction monitoring or other anti-money laundering features, despite publicly saying they could not actually control it.
The indictment also makes frequent references to Alexey Pertsev, another co-founder, who was arrested last year in the Netherlands where he currently awaits trial on money laundering allegations. The DOJ further alleged that the defendants knew their service was being used to launder funds from hacks and other thefts, seeming to reference the KuCoin and BitMart hacks from 2020 and 2021, respectively.
Wednesday’s arrests come barely a week after a federal judge ruled that crypto investors’ and developers’ rights had not been infringed by OFAC sanctioning Tornado Cash.